What changed in this filing

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Item 1. Financial Statements

2020-11-16 compared with 2020-08-14 · 111 added, 95 removed, 530 unchanged (28% of the section changed)

2 unchanged sentences

CONDENSED BALANCE SHEETS (in thousands, except share and per share data)

September 30,

Current assets:

28 unchanged sentences

Common stock, $.001 par value, 90,000,000 shares authorized;

24,637,222 and 24,620,079 issued and 24,192,157 and 24,320,079 outstanding at June 30, 2020 and December 31, 2019, respectively

Treasury stock at cost, 445,065 and 300,000 shares at June 30, 2020 and December 31, 2019, respectively

24,637,222 and 24,620,079 issued and 24,192,157 and 24,320,079 outstanding at September 30, 2020 and December 31, 2019, respectively

Treasury stock at cost, 445,065 and 300,000 shares at September 30, 2020 and December 31, 2019, respectively

Additional paid-in-capital

6 unchanged sentences

(in thousands, except share and per share data)

Three Months Ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Product sales

19 unchanged sentences

(unaudited, in thousands)

Six months ended June 30,

Nine months ended September 30,

Operating activities:

32 unchanged sentences

Payments on lines of credit

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

15 unchanged sentences

Balances, June 30, 2019

Share based compensation expense and stock units vested

Balances, September 30, 2019

paid-in-capital

6 unchanged sentences

Balances, June 30, 2020

Share based compensation expense and stock units vested

Balances, September 30, 2020

See accompanying notes to condensed financial statements.

1 unchanged sentence

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

13 unchanged sentences

On April 17, 2019, the Company purchased 300,000 shares of its common stock at the price of $10.20 per share, pursuant to the Company’s repurchase program.

During the six months ended June 30, 2020, the Company purchased 145,065 shares of its common stock at an average price of $9.77 per share, pursuant to the Company’s repurchase program.

During the nine months ended September 30, 2020, the Company purchased 145,065 shares of its common stock at an average price of $9.77 per share, pursuant to the Company’s repurchase program.

Under the repurchase program, the Company may purchase up to $10,000 of its common stock.

13 unchanged sentences

Basis of Presentation

The accompanying unaudited interim condensed financial statements as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the U.S.

The accompanying unaudited interim condensed financial statements as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission ("SEC") as required by Regulation S-X, Rule 8-03.

In the opinion of management, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the Company's financial position for the periods presented.

The results for the three and six

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, or any other period.

results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, or any other period.

The accompanying balance sheet as of December 31, 2019 was derived from audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2019 (the "Form 10-K").

26 unchanged sentences

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

For the three months ended June 30, 2020 and 2019, sales to an independent third-party and its affiliates accounted for $14,320 or 36.6% and $8,520 or 21.4% of our product sales, respectively.

For the six months ended June 30, 2020 and 2019, sales to an independent third-party and its affiliates accounted for $26,306 or 37.4% and $13,323 or 18.7% of our product sales, respectively.

For the three and six months ended June 30, 2020, total cost of product sales included $7,849 and $12,756 of costs, mainly relating to up front dealer commission and reimbursed dealer expenses for consignment sales and certain other similar costs incurred for retail store and commercial sales.

For the three and six months ended June 30, 2019, total cost of product sales included $7,573 and $11,900 of costs, mainly relating to up front dealer commission and reimbursed dealer expenses for consignment sales and certain other similar costs incurred for retail store and commercial sales.

For the three months ended September 30, 2020 and 2019, sales to an independent third-party and its affiliates accounted for $13,253 or 36.2% and $13,027 or 36.9% of our product sales, respectively.

For the nine months ended September 30, 2020 and 2019, sales to an independent third-party and its affiliates accounted for $39,559 or 37.0% and $26,350 or 24.7% of our product sales, respectively.

For the three and nine months ended September 30, 2020, total cost of product sales included $7,073 and $15,878 of costs, mainly relating to up front dealer commission and reimbursed dealer expenses for consignment sales and certain other similar costs incurred for retail store and commercial sales.

For the three and nine months ended September 30, 2019, total cost of product sales included $4,713 and $16,600 of costs, mainly relating to up front dealer commission and reimbursed dealer expenses for consignment sales and certain other similar costs incurred for retail store and commercial sales.

Other revenue consists of consignment fees, service fees and other miscellaneous income.

5 unchanged sentences

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

Disaggregation of Revenue .

The following table summarizes customer contract revenues disaggregated by source of the revenue for the three and six months ended June 30, 2020 and 2019:

The following table summarizes customer contract revenues disaggregated by source of the revenue for the three and nine months ended September 30, 2020 and 2019:

Three months ended

Six months ended

Nine months ended

September 30,

Product sales:

26 unchanged sentences

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

5 unchanged sentences

The Company establishes an allowance for doubtful accounts for amounts that are deemed to be uncollectible.

At June 30, 2020 and December 31, 2019, the allowance for doubtful accounts totaled $374 and $457, respectively.

At September 30, 2020 and December 31, 2019, the allowance for doubtful accounts totaled $414 and $457, respectively.

Recent Accounting Pronouncements

19 unchanged sentences

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

3 unchanged sentences

Interest income is recognized monthly per the terms of the financing agreements.

The average contractual interest rate per loan was approximately 13.9% as of June 30, 2020 and 14.0% as of December 31, 2019.

The average contractual interest rate per loan was approximately 13.9% as of September 30, 2020 and 14.0% as of December 31, 2019.

Consumer loans receivable have maturities that range from 3 to 30 years.

3 unchanged sentences

The Company may also receive escrow payments for property taxes and insurance included in its consumer loan collections.

The liabilities associated with these escrow collections totaled $7,548 and $7,530 as of June 30, 2020 and December 31, 2019, respectively, and are included in escrow liability in the balance sheets.

The liabilities associated with these escrow collections totaled $8,305 and $7,530 as of September 30, 2020 and December 31, 2019, respectively, and are included in escrow liability in the balance sheets.

Allowance for Loan Losses—Consumer Loans Receivable

22 unchanged sentences

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

6 unchanged sentences

At each reporting period, the fair value of the collateral is adjusted to the lower of the amount recorded at repossession or the estimated sales price less estimated costs to sell, based on current information.

Repossessed homes totaled $1,651 and $1,846 as of June 30, 2020 and December 31, 2019, respectively, and are included in other assets in the balance sheets.

Repossessed homes totaled $2,121 and $1,846 as of September 30, 2020 and December 31, 2019, respectively, and are included in other assets in the balance sheets.

Consumer loans receivable, net of allowance for loan losses and deferred financing fees, consisted of the following:

As of June 30,

As of September 30,

As of December 31,

4 unchanged sentences

The following table presents a detail of the activity in the allowance for loan losses:

Three Months Ended June 30,

Six Months Ended June 30,

Three months ended September 30,

Nine Months Ended September 30,

Allowance for loan losses, beginning of period

2 unchanged sentences

The impaired and general reserve for allowance for loan losses consisted of the following:

As of June 30,

As of September 30,

As of December 31,

7 unchanged sentences

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

As of June 30, 2020 and December 31, 2019, the total principal outstanding for consumer loans on nonaccrual status was $1,646 and $1,677, respectively.

A detailed aging of consumer loans receivable that are past due as of June 30, 2020 and December 31, 2019 were as follows:

As of June 30,

As of September 30, 2020 and December 31, 2019, the total principal outstanding for consumer loans on nonaccrual status was $1,898 and $1,677, respectively.

A detailed aging of consumer loans receivable that are past due as of September 30, 2020 and December 31, 2019 were as follows:

As of September 30,

As of December 31,

10 unchanged sentences

The Company establishes an allowance reserve composed of specific and general reserve amounts.

The Company had concentrations of MHP Notes with an independent third-party and its affiliates that equaled 47.4% and 38.3% of the principal balance outstanding, all of which was secured, as of June 30, 2020 and December 31, 2019, respectively.

There were minimal past due balances on the MHP Notes as of June 30, 2020 and December 31, 2019 and no charge offs were recorded for MHP Notes during the three and six months ended June 30, 2020 and 2019, respectively.

Allowance for loan loss is considered immaterial and accordingly no loss is recorded against the MHP Notes as of June 30, 2020 and December 31, 2019.

The Company had concentrations of MHP Notes with an independent third-party and its affiliates that equaled 51.1% and 38.3% of the principal balance outstanding, all of which was secured, as of September 30, 2020 and December 31, 2019, respectively.

There were minimal past due balances on the MHP Notes as of September 30, 2020 and December 31, 2019 and no charge offs were recorded for MHP Notes during the three and nine months ended September 30, 2020 and 2019, respectively.

Allowance for loan loss is considered immaterial and accordingly no loss is recorded against the MHP Notes as of September 30, 2020 and December 31, 2019.

OTHER NOTES RECEIVABLE

5 unchanged sentences

The balance outstanding on the other notes receivable were as follows:

As of June 30,

As of September 30,

As of December 31,

3 unchanged sentences

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

Inventories consisted of the following:

As of June 30,

As of September 30,

As of December 31,

4 unchanged sentences

Property, plant and equipment consisted of the following:

As of June 30,

As of September 30,

As of December 31,

4 unchanged sentences

Total property, plant and equipment

Depreciation expense was $252 with $98 included as a component of cost of product sales for the three months ended June 30, 2020 and $253 with $91 included as a component of cost of product sales for the three months ended June 30, 2019.

Depreciation expense was $501 with $203 included as a component of cost of product sales for the six months ended June 30, 2020 and $494 with $181 included as a component of cost of product sales for the six months ended June 30, 2019.

Depreciation expense was $249 with $88 included as a component of cost of product sales for the three months ended September 30, 2020 and $272 with $94 included as a component of cost of product sales for the three months ended September 30, 2019.

Depreciation expense was $750 with $267 included as a component of cost of product sales for the nine months ended September 30, 2020 and $766 with $275 included as a component of cost of product sales for the nine months ended September 30, 2019.

Other assets consisted of the following:

As of June 30,

As of September 30,

As of December 31,

1 unchanged sentence

Repossessed homes

Depreciation expense for the leased property was $38 and $71 for the three and six months ended June 30, 2020.

Depreciation expense for the leased property was $53 and $124 for the three and nine months ended September 30, 2020.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

1 unchanged sentence

Accrued liabilities consisted of the following:

As of June 30,

As of September 30,

As of December 31,

14 unchanged sentences

The New Revolver accrues interest at one-month LIBOR plus 2.00%.

The interest rate in effect as of June 30, 2020 was 2.18%.

The interest rate in effect as of September 30, 2020 was 2.16%.

As with Revolver 1, amounts available under the New Revolver are subject to a formula based on eligible consumer loans and MHP Notes and are secured by all accounts receivable and the consumer loans receivable and MHP Notes.

The amount of available credit under the New Revolver was $32,465 as of June 30, 2020.

The amount of available credit under the New Revolver was $26,180 as of September 30, 2020.

In connection with the New Revolver, we paid certain arrangement fees and other fees of approximately $0.3 million, which were capitalized as unamortized debt issuance costs and will be amortized to interest expense over the life of the New Revolver.

For the three months ended June 30, 2020 and 2019, interest expense under the Capital One Revolvers was $226 and $66, respectively, and for the six months ended June 30, 2020 and 2019, interest expense under the Capital One Revolvers was $545 and $139, respectively.

The outstanding balance as of June 30, 2020 and December 31, 2019 was $37,535 and $28,860, respectively.

The Company was in compliance with all financial covenants as of June 30, 2020, including that it maintain a tangible net worth of at least $120,000 and that it maintain a ratio of debt to EBITDA of 4 to 1, or less.

For the three months ended September 30, 2020 and 2019, interest expense under the Capital One Revolvers was $239 and $94, respectively, and for the nine months ended September 30, 2020 and 2019, interest expense under the Capital One Revolvers was $785 and $233, respectively.

The outstanding balance as of September 30, 2020 and December 31, 2019 was $43,820 and $28,860, respectively.

The Company was in compliance with all financial covenants as of September 30, 2020, including that it maintain a tangible net worth of at least $120,000 and that it maintain a ratio of debt to EBITDA of 4 to 1, or less.

In April 2016, the Company entered into an agreement with Veritex Community Bank to secure an additional revolving line of credit of $15,000 (“Revolver 2”).

4 unchanged sentences

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

4 unchanged sentences

The Company was in compliance with all required covenants as of March 31, 2020.

For the six months ended June 30, 2020 and 2019, interest expense was $17 and $86, respectively.

For the nine months ended September 30, 2020 and 2019, interest expense was $17 and $111, respectively.

The outstanding balance as of March 31, 2020 and December 31, 2019 was $2,001.

12 unchanged sentences

The note is secured by certain real property of the Company.

Interest expense was $38 and $76 for the three and six months ended June 30, 2019.

Interest expense was $37 and $113 for the three and nine months ended September 30, 2019.

In October 2019, this note was paid in full.

2 unchanged sentences

The promissory note calls for monthly principal and interest payments of $6 until June 1, 2026.

Interest expense was $0 and $1 for the three and six months ended June 30, 2019.

Interest expense was $0 and $1 for the three and nine months ended September 30, 2019.

In January 2019, this note was paid in full.

6 unchanged sentences

The PILOT agreement is collateralized by the assets of the Project.

As of June 30, 2020, the Company had not drawn on this credit facility.

As of September 30, 2020, the Company had not drawn on this credit facility.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

2 unchanged sentences

Stock options may be granted with a contractual life of up to ten years.

At June 30, 2020, the Company had 9.8 million shares available for grant under the Compensation Plan.

At September 30, 2020, the Company had 9.7 million shares available for grant under the Compensation Plan.

In February 2019, the Company granted 120,000 restricted shares of its common stock to members of senior management.

14 unchanged sentences

Nonvested, January 1, 2020

Nonvested, June 30, 2020

As of June 30, 2020, approximately 45,000 RSUs remained unvested.

Unrecognized compensation expense related to these RSUs at June 30, 2020 was $550 and is expected to be recognized over 4.52 years.

Nonvested, September 30, 2020

As of September 30, 2020, approximately 45,000 RSUs remained unvested.

Unrecognized compensation expense related to these RSUs at September 30, 2020 was $512 and is expected to be recognized over 4.32 years.

The Company granted 58,694 incentive stock options to a member of senior management.

9 unchanged sentences

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

The Company granted 34,626 incentive stock options to a member of senior management.

The options were granted on August 10, 2020 at an exercise price of $14.44 per share.

The options vest at a rate of 20.0% annually, beginning on August 10, 2021, and becoming fully vested on August 10, 2025.

All options expire ten years after the date of grant.

Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows:

risk free interest rate of 0.24%;

dividend yield of 0.00%;

expected volatility of common stock of 75.0% and expected life of options of 6.5 years.

The following is a summary of option activity (in thousands, except per unit data):

3 unchanged sentences

Outstanding, January 1, 2020

Outstanding, June 30, 2020

Exercisable, June 30, 2020

Outstanding, September 30, 2020

Exercisable, September 30, 2020

On March 31, 2020, the Company filed a registration statement on Form S-8 to register with the SEC approximately 2.3 million shares of Legacy common stock available for issuance under the 2018 Incentive Compensation Plan.

The registration statement became effective upon filing.

The provision for income tax expense for the six months ended June 30, 2020 and 2019 was $5.2 million and $4.8 million, respectively.

The effective tax rate for the six months ended June 30, 2020 was 22.7% and differs from the federal statutory rate of 21% primarily due to state income taxes.

The effective tax rate for the six months ended June 30, 2019 was 23.2% and differs from the federal statutory rate of 21% due to state income taxes.

The provision for income tax expense for the nine months ended September 30, 2020 and 2019 was $8.1 million and $6.7 million, respectively.

The effective tax rate for the nine months ended September 30, 2020 was 22.7% and differs from the federal statutory rate of 21% primarily due to state income taxes.

The effective tax rate for the nine months ended September 30, 2019 was 23.3% and differs from the federal statutory rate of 21% due to state income taxes.

COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

The Company will adjust its self-insured medical benefits reserve based on actual experience, estimated costs and changes to assumptions.

At June 30, 2020, the Company accrued a $179 liability for incurred but not reported claims.

At September 30, 2020, the Company accrued a $271 liability for incurred but not reported claims.

The Company is contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for independent retailers of its products.

1 unchanged sentence

The Company’s obligation under these repurchase agreements ceases upon the purchase of the home by the retail customer.

The maximum amount for which the Company was liable under such agreements approximated $404 and $260 at June 30, 2020 and December 31, 2019, respectively, without reduction for the resale value of the homes.

The Company considers its obligations on current contracts to be immaterial and accordingly have not recorded any reserve for repurchase commitment as of June 30, 2020 or December 31, 2019.

The Company leases facilities under operating leases that typically have 10-year terms.

These leases usually offer the Company a right of first refusal that affords the Company the option to purchase the leased premises under certain terms in the event the landlord attempts to sell the leased premises to a third party.

Rent expense was $144 and $133 for the three months ended June 30, 2020, and 2019, respectively, and $288 and $264 for the six months ended June 30, 2020, and 2019, respectively.

The Company also subleases properties to third parties, ranging from 3-year to 11-year terms with various renewal options.

Rental income from the subleased property was approximately $89 and $97

The maximum amount for which the Company was liable under such agreements approximated $603 and $260 at September 30, 2020 and

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

for the three months ended June 30, 2020 and 2019, respectively, and $182 and $186 for the six months ended June 30, 2020 and 2019, respectively.

Future minimum lease commitments under all non-cancelable operating leases for each of the next five years at June 30, 2020, are as follows:

December 31, 2019, respectively, without reduction for the resale value of the homes.

The Company considers its obligations on current contracts to be immaterial and accordingly have not recorded any reserve for repurchase commitment as of September 30, 2020 or December 31, 2019.

The Company leases facilities under operating leases that typically have 10-year terms.

Rent expense was $135 and $139 for the three months ended September 30, 2020, and 2019, respectively, and $423 and $403 for the nine months ended September 30, 2020, and 2019, respectively.

The Company also subleases properties to third parties, ranging from 3-year to 11-year terms with various renewal options.

Rental income from the subleased property was approximately $90 and $86 for the three months ended September 30, 2020 and 2019, respectively, and $264 and $272 for the nine months ended September 30, 2020 and 2019, respectively.

Future minimum lease commitments under all non-cancelable operating leases for each of the next five years at September 30, 2020, are as follows:

Legal Matters

11 unchanged sentences

The fair values of the interest rate swap agreement was an asset included in prepaid expenses and other current assets and was $3 at December 31, 2019.

Included in the statements of operations for the six months ended June 30, 2020 and 2019 were losses of $15 and $46, respectively, which are the result of the changes in the fair values of the interest rate swap agreement.

Fair Value Measurements

The Company accounts for its investments and derivative instruments in accordance with ASC 820-10, Fair Value Measurement, which among other things provides the framework for measuring fair value.

That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I

Included in the statements of operations for the nine months ended September 30, 2020 and 2019 were losses of $15 and $37, respectively, which are the result of the changes in the fair values of the interest rate swap agreement.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

measurement) and the lowest priority to unobservable inputs (Level III measurements).

Fair Value Measurements

The Company accounts for its investments and derivative instruments in accordance with ASC 820-10, Fair Value Measurement, which among other things provides the framework for measuring fair value.

That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I measurement) and the lowest priority to unobservable inputs (Level III measurements).

The three levels of fair value hierarchy under ASC 820-10, Fair Value Measurement , are as follows:

21 unchanged sentences

The Company also assessed the fair value of the consumer loans receivable based on the discounted value of the remaining principal and interest cash flows.

The Company determined that the fair value of the consumer loan portfolio was approximately $123,000 compared to the book value of $107,236 as of June 30, 2020, and a fair value of approximately $119,000 compared to the book value of $105,042 as of December 31, 2019.

The Company determined that the fair value of the consumer loan portfolio was approximately $134,000 compared to the book value of $108,573 as of September 30, 2020, and a fair value of approximately $119,000 compared to the book value of $105,042 as of December 31, 2019.

This is a Level III valuation technique.

1 unchanged sentence

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands)

4 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Net income (in 000's)

2 unchanged sentences

Restricted stock grants

Stock options

Diluted weighted-average common shares outstanding

Earnings per share attributable to Legacy Housing Corporation

The diluted earnings per share calculation excludes 79,459 and 164,487 potential shares for the three months ended June 30, 2020 and 2019, respectively, and excludes 90,783 and 149,441 potential shares for the six months ended June 30, 2020 and 2019, respectively because the effect of including theses potential shares would be antidilutive.

The diluted earnings per share calculation excludes 123,624 potential shares for the three months ended September 30, 2019, and excludes 54,446 and 124,498 potential shares for the nine months ended September 30, 2020 and 2019, respectively because the effect of including theses potential shares would be antidilutive.

RELATED PARTY TRANSACTIONS

Bell Mobile Homes, a retailer owned by one of the Company’s significant owners, purchases manufactured homes from the Company.

Accounts receivable balances due from Bell Mobile Homes were $208 and $549 as of June 30, 2020 and December 31, 2019, respectively.

Accounts payable balances due to Bell Mobile Homes for maintenance and related services were $0 and $74 as of June 30, 2020 and December 31, 2019, respectively.

Home sales to Bell Mobile Homes were $533 and $1,432 for the three months ended June 30, 2020 and 2019, respectively and $1,416 and $2,290 for the six months ended June 30, 2020 and 2019, respectively.

Accounts receivable balances due from Bell Mobile Homes were $34 and $549 as of September 30, 2020 and December 31, 2019, respectively.

Accounts payable balances due to Bell Mobile Homes for maintenance and related services were $33 and $74 as of September 30, 2020 and December 31, 2019, respectively.

Home sales to Bell Mobile Homes were $383 and $829 for the three months ended September 30, 2020 and 2019, respectively and $1,800 and $3,118 for the nine months ended September 30, 2020 and 2019, respectively.

SUBSEQUENT EVENTS

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements